{"id":33904,"date":"2016-05-17T11:46:20","date_gmt":"2016-05-17T11:46:20","guid":{"rendered":"https:\/\/www.constablevat.com\/?p=33904"},"modified":"2016-05-17T11:46:20","modified_gmt":"2016-05-17T11:46:20","slug":"cvc-blog-insurance-intermediary-services-water-continues-build-behind-dam","status":"publish","type":"post","link":"https:\/\/www.constablevat.com\/cvc-blog-insurance-intermediary-services-water-continues-build-behind-dam\/","title":{"rendered":"CVC Blog – Insurance intermediary services – the water continues to build behind the dam"},"content":{"rendered":"

When the CJEU released its decision in the case Arthur Andersen & Co Accountants<\/em> (C-472\/03) in March 2005 HMRC said that “implementation of the judgement will lead to VAT becoming chargeable on many of the outsourced services currently provided to insurers.<\/em>”<\/p>\n

In July 2005 HMRC set out proposals for changes that were to become effective from 1\u00a0January 2006.\u00a0 However, following responses to its consultation HMRC decided to defer change pending a review by the European Commission.\u00a0 This European Commission review started and even appeared to be making progress towards a better set of harmonised rules with specific provision for outsourcing.\u00a0 However, in 2015 it was abandoned when it became clear that the European Commission could not obtain the support of all member states for a clear framework of harmonised rules.<\/p>\n

So more than 10 years after the Andersen decision … back to square one!<\/p>\n

There have been many other cases concerning the nature of insurance intermediary services since Andersen.\u00a0 It is clear from some of these cases that UK VAT law exempts supplies that should not be exempt under EU law.\u00a0 This was highlighted again when the CJEU gave its recent judgement in the Aspiro<\/em> case that the service of settling insurance claims could not be exempt for VAT when the claims handler had no involvement in arranging the insurance to which those claims relate.<\/p>\n

We know that UK law has to change, unless perhaps the referendum vote in June 2016 is to leave the EU!\u00a0 We can also be confident that if the UK does not deal with this then eventually the European Commission will take action to force a change. \u00a0\u00a0What we don’t know is when and to what extent the rules will change.<\/p>\n

As in most things to do with VAT, one can debate the precise interpretation of the court decisions that signpost change.\u00a0 For example, Aspiro<\/em> appears to allow exemption of claims handling provided by a person that has some involvement in arranging the original insurance to which the claims relate.\u00a0\u00a0 However, is a “critical mass” of introductory service related work required to allow the entire supply to be treated as a composite exempt supply? \u00a0\u00a0What are the implications for management of “shell entities” such as mutual insurers and P&I Clubs?<\/p>\n

Current HMRC guidance breaks management services relating to P&I Clubs into four broad headings, the third of which is “policy administration and claims handling<\/em>” and the fourth\u00a0 “general and financial management.<\/em>”\u00a0 HMRC policy is that the entire P&I Club management supply is:<\/p>\n